Question: What Do You Get When You Mix "Do Good" With "Someone Else's Checkbook"?

Answer: Negative One Hundred Billion Dollars.

That's a rough estimate of operating losses at Fannie Mae in the last six quarters.  It should be obvious to anyone paying attention that no entity without direct government patronage or some other means of insulating itself from the real world would be permitted to destroy value with such abandon before some radical intervention was imposed.  Remember that car company, the one we got all up in arms about after "massive losses."  We turned off the spigot (sort of) on that one after a "mere" $29.7 billion loss in six quarters.


(source: Bloomberg)


So why is it that with three times the losses in the same relative time period we are even discussing handing Fannie $15 billion more to toss to the four winds of "the right thing to do"?  That it is even brought up as a possibility should literally offend the senses. What other firm in "conservatorship" would ever be permitted a sustained multi-billion dollar loss like this?  Perhaps the "conservator" has some other idea about the meaning of the words "conserve" or "conservation" than the rest of the planet.  (Perhaps he/she is part of the green movement?)  Oh, wait...

9/7/08: US GOVT ASSIGNS FHFA (The Federal Housing Finance Agency) TO ACT AS CONSERVATOR. [Bloomberg]

...never mind.


(source: Bloomberg)

The answer to these questions is actually quite obvious.  Fannie, and its cohorts, are not firms.  They are literally policy instruments of the federal government and, more recently, the Federal Housing Authority- newly christened as the latest "lender of last resort".  By the way, if you don't appreciate the irony in a term like "lender of last resort" in an environment where the government can create new ones at will, well, we're not sure quite what to do with you.  We also aren't quite sure when these entities will hit the Chandrasekhar limit and begin sucking the rest of the economy through the event horizon of sovereign default, but the warping of financial space-time nearby suggests that we are getting close.  Then again, objects near the event horizon can appear frozen due to time dilation.  Perhaps we've passed it already.

Whatever the case, this must finally end.  Let's hope it is not in tears... or in the dollar's rapid spaghettification.  (Oops.  Too late)